The COVID-19 situation in Romania has somehow stabilised in early November as a result of a series of restrictions adopted in late October in order to deal with the most difficult phase of the pandemic so far. Therefore, the number of daily cases has seen a consistent decrease of almost 50%, combined with a surge of vaccinations during the last month, as 35% of the population is fully vaccinated compared with less than 30% at the end of September, while the booster (third) dose has also been performed to more than 5% of the population already.
The Covid digital certificate is now required all around the country in order to enter shopping centres, restaurants, DIY units and many other indoor spaces and it is still unknown for how long, as this measure is due to be extended or not at the end of November.
Regarding the real estate market, Q3 2021 has been an impressive quarter for most segments. For example, we have seen the highest ever office quarterly new supply in Bucharest, as 132,000 sq m of office spaces have been delivered during this period, while the Q1-Q3 take-up has increased by 33% when compared with the same period of 2020, as a consistent pipeline of around 280,000 sq m is under construction and expected to be delivered in the following 18-24 months.
The demand for industrial & logistics spaces remained solid in Q3 2021, the total leasing activity reaching 202,000 sq m. After three quarters, a cumulated take-up of 562,000 sq m has been recorded, a level only 3% below the same period of the previous year, as the vacancy rate continued to decrease to less than 5% at national level. Moreover, more than 600,000 sq m of new spaces are currently under construction, thus setting the scene for a positive 2022.
The retail market, even without a robust new supply in 2021, benefits from a pipeline of around 120,000 sq m of under construction projects, while developments amounting to more than 460,000 sq m are under different planning stages.
20 OctoberThe number of COVID-19 cases has been relatively low during the summer, but the Delta variant has become predominant and thus caused a surge of infections starting from September onwards, as an average of more than 10,000 daily cases have been recorded in October. Moreover, the vaccination campaign has strongly faded since May and less than 30% of the population is fully vaccinated, one of the lowest rates in Europe.
Therefore, new restrictions have been imposed in the areas with a high incidence of infections, as a Covid digital certificate is required to enter restaurants, cinemas, sporting arenas and other spaces, while a large number of schools have also been closed as a result of the increasing number of infections amongst students and teaching staff.
Regarding the economic environment, Romania is showing resilience after posting growth for 4 consecutive quarters since Q3 2020, with an overall increase of around 7% being expected in 2021, the country being one of the best performers in the European Union.
Consumption has picked up significantly in H1 2021 (+13.4% y-o-y), a trend which is expected to continue going forward despite the restrictions.
A number of important investment transactions in excess of EUR 50 million have been closed this year, as office yields are forecasted to record a small compression for prime assets by the end of 2021, while we are seeing more activity by investors, with a number of ongoing deals.
The office and industrial market segments remained active all throughout 2021, as almost all new projects were delivered on time, while a significant pipeline is expected to be completed in the next 2 years with no relevant delays.
Romania has seen a significant decrease of new COVID-19 cases from April onwards and many Government restrictions have been lifted in the last two months, as almost all indoor and outdoor spaces have reopened (schools, restaurants, cinemas, sport venues, playing grounds etc.).
Q1 2021 produced a surprising q-o-q growth of 2.9%, as a yearly GDP increase in the 5-7% range is now being estimated by both Government and analysts, the Romanian economy is recovering faster than expected.
The industrial and logistics market has been the spearhead segment once again, as the total take-up in H1 2021 was 21% higher compared to H1 2020, thus confirming its position as the leading real estate sector during the pandemic.
Both office and retail markets will record a consistent supply in 2021, with most projects due to be completed in the second semester. Moreover, the office take-up in Bucharest has begun to pick-up the pace in Q2, as an overall y-o-y increase of more than 20% is highly expected in 2021.
Romania still has some of the most attractive yields in the CEE region and the market liquidity should remain healthy in H2 2021 as well, the local investment market has produced a number of important transactions of landmark assets in a period of uncertainty during the last 12 months.
Romania has been in a state of alert since 15 May 2020, this has been extended monthly. Most schools reopened following a decrease in the number of daily infections in January and February, but March has seen another surge of COVID-19 cases. A new wave of restrictions has been imposed from April onwards in order to combat this trend and to support the vaccination programme which has fully immunised only around 8% of the Romanian population so far.
H2 2020 was very solid in terms of economic recovery, with quarter on quarter GDP growths of 5.6% and 4.8% respectively being recorded in Q3 and Q4 2020, as preliminary data indicates a yearly GDP decline of -3.9% in 2020 - a better performance than was expected at the beginning of the pandemic. The outlook for 2021 is quite positive, with a GDP growth in the 4-5% range being estimated by both the Government and analysts.
The demand for industrial and logistics spaces remained on an upward trend in Q1 2021, since the total take-up recorded a 65% year on year increase, a trend which is expected to continue going forward.
The office and retail sectors have both seen new deliveries in the first quarter of the year, and the new supply will be more consistent in 2021 compared with 2020. Moreover, the share of the office net take-up has considerably increased in Bucharest in Q1 2020, thus the market is making its first steps towards the pre-pandemic levels.
Market liquidity held impressively throughout 2020 and should remain healthy in 2021 as well, several important transactions are expected to close during the year.
Romania has been on a state of alert since 15 May 2020, with limited restrictions compared to the previous State of Emergency, as all shopping centres, hotels, churches, museums, exhibition halls and public parks reopened by 15 June.
Following an increase in the number of new infections in October and November to around 10,000 daily cases, new prevention measures were adopted on 9 November, measures which helped in terms of decreasing the number of new daily cases to around 3,000 from mid-December onwards.
Several signs of recovery appeared as retail sales recorded a surprising 2.1% y-o-y increase during the first eleven months of the year, while construction works registered an impressive year-on-year increase of 17% in the January-November period. Moreover, a GDP growth of 4.5% is projected for 2021.
The industrial and logistics segment produced an outstanding performance in 2020 as the total take-up almost doubled compared to the 2019 figures while the new deliveries amounted to a 30% y-o-y increase.
The office and retail sectors were more impacted by the pandemic, both recording y-o-y decreases in terms of new supply. Consequently, several planned retail and office projects have been put on hold, while most of the launched developments are going forward as planned.
The investment market was also solid, especially considering the CEE/SEE context, as the Romanian market was the only one which recorded a growth in 2020 compared to 2019 (+28%).
There have been more than 11,000 confirmed cases of coronavirus in Romania so far and the country is currently under a State of Emergency until 15 May. An almost complete lockdown has been enforced in order to encourage social distancing during this critical period. The President announced that a relaxation plan will be considered after 15 May if the number of infected people decreases.
In the real estate market, the industrial sector has shown encouraging signs as both demand and supply were at almost similar levels compared to Q1 2019, a trend expected to continue going forward.
However, all retail projects have drastically reduced their activity in late March as a precautionary measure dictated by the current State of Emergency. Several scheduled deliveries have been postponed for the second part of the year.
Moreover, while the level of new office space delivered in Bucharest was similar to Q1 2019, the leasing activity recorded a 50% y-o-y decrease in Q1 2020.
The most relevant investment transaction in Q1 pertained to the CTP purchase of Equest Logistic Park in Bucharest, a transaction brokered by Cushman & Wakefield Echinox, as the total investment volume saw a 15% y-o-y increase. Otherwise some important transactions have been either postponed or cancelled altogether mainly as a result of the present climate of uncertainty.